Friday, January 04 was a typical day in the life of an option buyer. It was a day when hopes are first built, dreams of a big profit are seen and then the house of cards comes crashing.

NIFTY ended up by 55 points not worried about what happened in US Markets on Thursday.

TATASTEEL made the new 52 week low in the early trades at Rs. 479.55. Then it shot up in the last 15 minutes to go above 490. Do we start a rethink about the trade? No. not yet. Stocks do not make 52 week highs or lows without a reason and most of the time they keep moving in the same direction with occasional abrupt move in the other direction. We wait for the trend to come back.

M&M did likewise. Came down and then went up.

SUNPHARMA closed lower but the PUT 380 went down. That is what time decay does to our trades. Perform quickly or lose money.

To add insult to injury, INFY did quite the reverse. It ended negative on a strong day for NIFTY. The CALL 700 which was doing well, lost money and we were beaten on all the fronts.

We are just holding our head above water. A day earlier, we were looking at a profit of more than Rs. 15000. We are back to nothing. This is the reality of a trader’s life. Pain of loss when you are not expecting it.

Well, we can not fight with the facts. Whatever happened is to be accepted. Let us think of further stress. On Thursday US Markets were down , NIFTY did not care. On Friday, US markets were up by 4%. Now NIFTY is likely to follow what happened in US. SGX NIFTY is indicating an up move of 111 points at 8:30 am. So we are in for a little more punishment in PUTS but the INFY CALL is likely to return to profitability.

These are conjectures. Reality will be known when the trading ends at 3:30 pm. We do not give up and stay with our expectations.

New Trades: 

Yesterday I was at Mumbai for the F&O Workshop. One of the likely trades which was discussed with the participants was ASHOKLEY .

The stock made a 52 week low of Rs. 96.00 on Friday and the last traded price was Rs. 96.70. A stock making 52 week low fits both the criteria of 30 day and 7 day weakness. With a likely positive opening for the market, this stock may also show an upward move initially. We wait for a while and take a trade a little late during the day.

Ideally, we should go for PUT 90 which is about 7% away from the current price but with the likely up move, buying PUT 92.5 may be prudent.

On Friday closing price for this option was Rs. 1.95. It may be possible to get it for around Rs. 1.40-1.60 today if the stock opens higher.

ASHOKLEY PUT 92.5@ Rs. 1.40-1.60 is my likely trade for the day. Maximum loss in the trade is Rs. 6400 as the lot size is 4000.

Trade cautiously, trade profitably.

Disclaimer: This post and examples are for teaching purpose only and are not meant as advice/suggestion to trade in these stocks. Trading in Futures and Options can lead to big losses and should be done with appropriate knowledge and advice only. Mentioning the stocks here does not imply that I have a trading position or likely to take a trade in these stocks.